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First, the rise of open source software has reduced the attractiveness of Microsoft's operating systems. The second threat is the rise of what is known as 'the cloud', meaning the increasing use of the internet by people to run applications or store data as opposed to the hard drive.

Online software from companies like Google can be delivered more cheaply and the more immediate feedback system allows for faster improvements. Competitors are changing the model of business that made Microsoft great.

For instance, instead of selling customers a box containing the latest software, competitors can offer programmes as a service or give them away for free, while earning revenue from advertising.

The third threat arises because no matter what Microsoft does to make its software secure, there are always some vulnerabilities, and it hasn't cracked this problem yet.

Source:
Peaks, valleys and vistas
The Economist, January 20th 2007
Review by Morice Mendoza